Guillermo_Furniture_Store_Scenario

Guillermo Furniture Store Scenario Gracie Harris ACC 561 November 11, 2010 Professor Nathanial Manning Guillermo Furniture Store Scenario Guillermo’s Furniture is a company in Sonora, Mexico. At first Guillermo’s business was very prosperous because his handcrafted furniture’s prices were at a slight premium for the quality it represented (University of Phoenix, 2010). Everything was going fine for Guillermo until the late 1990s. First, a new contender from overseas entered the furniture market using a technologically approach and very low prices (University of Phoenix, 2010). Second, the people of Sonora became aware of this new competition and this caused an expansion (University of Phoenix, 2010). Thus Guillermo lost profit, and the cost of labor became high. Guillermo must determine a way to endure these changes and he can do this by using budget and performance reports in his decision-making process. Using outstanding accounting information is pertinent for Guillermo as well as the aspect of how ethics can influence his accounting decisions. Budget and Performance Reports Budgets help to arrange and carry out current plans. Budgets are the most vital strategies for disciplining management. A budget is a quantitative look of a plan of proceedings and without budgets, planning may not acquire the important focal point that it usually warrants (Horngren, 2008). For both short and long-term systems, Guillermo can use these budgets to aid with his decision-making. He can also use this information to calculate the return on investment and return on equity for his business. Finally, Guillermo can use budgets from previous years to execute an analysis to maybe cut costs or find opportunities for improvement. Performance reports grant feedback by comparing outcomes with plans and by accenting variances, which are different from previous plans (Horngren, 2008). Performance reports contrast results to budgets, thereby encouraging managers to accomplish the objectives they are trying to attain. Guillermo’s main objective should be to use these reports to maintain productivity of the organizational units. Useful Accounting Information If Guillermo wants to have a successful business, he must decide on what accounting information is necessary. This accounting information is vital because it will allow Guillermo to make decisions, which are vital to the company. Excellent accounting information will aid Guillermo in achieving the goals and objectives for his business. The three types of accounting information that Guillermo should consider are as follows: • Scorekeeping. This is the buildup and categorization of data. Scorekeeping is also a routine evaluation in which managers obtain daily. • Attention directing. This is reporting and construing information that assists managers to center on operating problems, deficiencies, and opportunities of the product at hand. • Problem solving. The phase of accounting that often involves a particular study to review possible courses of action and recommends the best course to follow (Horngren, 2008). This is also a one-time decision. Ethics Ethical values are the foundation on which a cultured society survives (Smith, 2010). Without this foundation, the society would fall or become indifferent. Ethics deal with human conduct in relation to what is normally good and bad, right, and wrong (Horngren, 2008). The purpose of ethics in business or accounting is to make sure or direct employees to follow the code of conduct as it relate to the company. One of the most important attributes of ethics is integrity. Without integrity, it is impossible to manage a business successfully. Whatever decision Guillermo makes, he must rely on maintaining his integrity level. As Guillermo makes his accounting decisions, certain ethical values should be present. These values are honesty, responsibility, fairness, respect, and compassion, all of which play a vital part in the business world. Conclusion In summary, the use of budget and performance reports will allow businesses to be successful and productive. Guillermo has plenty of decisions to encounter. Therefore, Guillermo should consider what type of accounting information to use to regulate what type of investment decisions to make. Professional ethics is a very important aspect for any business. Guillermo will have a flourishing company as long as he continues to exhibit such attributes as competence, confidentiality, integrity, and credibility towards his customers. References Horngren, Charles T., et al. (2008). Introduction to management accounting. (14th ed.). New Jersey: Pearson-Prentice Hall. Smith, Dr. Katherine T. (2010). Business and accounting ethics. Retrieved from http://acct.tamu.edu/smith/ethics/ethics.htm University of Phoenix (2010). Guillermo’s furniture store scenario. Retrieved from https://ecampus.phoenix.eud/classroom/ic/classroom.aspx